Posted on 10/02/2007 7:59:24 AM PDT by shrinkermd
The price of ethanol has fallen by 30% over the past few months as a glut of the corn-based fuel looms, while the price of ethanol's primary component, corn, had risen. That is squeezing ethanol companies' profits and pushing some ethanol plants to the brink of bankruptcy.
Some ethanol companies are "under deathwatch" now, says Chris Groobey, a partner in the project-finance practice of law firm Baker & McKenzie, which has worked with lenders and private-equity funds involved with ethanol.
That could be fine for big efficient players like Archer-Daniels-Midland Co., one of the nation's biggest ethanol producers by output. ADM and other big ethanol companies probably can ride out the storm, even though they might have to scale back on their production. Smaller players may not fare as well, and may be snapped up by bigger survivors.
The downturn exposes the industry's reliance on political support in Washington, which has offered tax credits to refiners to blend ethanol with gasoline, as well as tariffs on imported ethanol and other measures.
...Ethanol companies are seeking increases in pending energy legislation in the amount of ethanol refiners are required to use. At the same time, food, cattle, poultry and other interests are quietly nudging lawmakers to pull back on subsidies that encourage ethanol production and have indirectly led to increases in food costs due to the increase in the price of corn and other grains.
"It's probably going to get worse before it gets better," said Brian Bolster, a vice president in the investment-banking division at Goldman Sachs Group Inc., which has invested in at least one ethanol plant. He nevertheless remains bullish over the long term for the industry, amid expectations of increasing government support, infrastructure improvements and other factors.
(Excerpt) Read more at online.wsj.com ...
Thanks. This is great data. This stock sound like the Ny Slimes Stock which should have been sold months if not years ago.
When liberals run companies and b$ like ethanol, the rest of us need to back away with our billfolds pressed against a brick wall.
Thanks. This is great data. This stock sound like the Ny Slimes Stock which should have been sold months if not years ago.
“So far, the stock went public (through a reverse acquisition) in the $10 dollar range, rising above $40 in May 2006, and currently trading under $9 dollars per share at a whopping P/E ratio of over 220. Since April 2006, insiders have cashed in 4.9 million shares of stock for income exceeding $1,200,000,000, with Jones and his son in law being on the receiving end of $530 million (Jones still holds 1.3 million shares). Insiders have now reduced their ownership to less than 20% (The DFA ownership % is also declining significantly). In 2006, after losing millions for three years, they were almost in a position to break even but issued $84 million in preferred stock dividends bringing them to a net loss of $87 million for the year (on sales of $226 million). That preferred stock is owned by none other than Cascade Investment, LLC (a Bill Gates investment arm) so all of the common shareholders now subordinated their interest to Gates.”
When liberals run companies and b$ like ethanol, the rest of us need to back away with our billfolds pressed against a brick wall.
My guess is they are much more interested in selling stock than ethanol. When the game is played out, shareholders will be bought out, for a nominal amount, by a big conglomerate saying that the small business just can’t operate on such small profit margins (see subject article of thread) or go private. Either way, they will disappear into oblivion obscuring evidence of what I consider to be just another scam.
In California, I’ve watched similar games in the solar and fuel-cell markets.
"...the current consensus is that...." sounds like a global warming argument.
Please show a reference for your assertion that does not involve David Pimentel, an early, persistent, and thoroughly debunked critic.
To get a negative energy return, it is necessary to ignore the existence of distillers grain (the high protein remains of the ethanol process used as cattle feed), and also to ignore process improvements made in the past five or so years.
Ethanol production is not a mature technology, and alternates for shelled corn will eventually be used--corn stalks, for example. Sugar cane works too.
“In California, I’ve watched similar games in the solar and fuel-cell markets.”
So have I since the 1970’s, which is one reason I’m so hard on anyone pushing these energy con games with solar, wind, fuel cell, ethanol and whatever other green B$ is being pushed.
I can remember going to a public meeting in Sacramento in Jan or Feb in the 1970’s. We were in the middle of a typical winter in the Sac Valley with fog last most days and burning off a little in the late afternoons with no real sunlight.
A group of these con artists were pushing to make Sac a solar power city in two decades.
I asked how solar power would work during typical foggy winters like we were having with weeks and months with no real sun.
The B$ response was no problem.
Fortunately an engineer, who was a neighbor, said that it was a real problem.
The next response was use batteries to store excess power. The engineer said that was impossible with fog from December through Feb. The cost of batteries was incredible and they would only last about 3 years and had to be replaced. Now we know about the problems of recycling batteries and how expensive they are if they are part of a home power supply.
The same group was pushing to get rid of the nuke plant and no dams for electrical power in N California, the beginning of save the great Salmon hoaxes.
Finally after a few minutes of their innane B$, I left and said that I would be selling our home in Sac and moving to a place that wasn’t controlled by people who should have been Mental institutions.
One of the things that bugs *you*? ;-)
Try being a farmer and listening to this stuff.
Yes, corn yields are way up — (not quite double — the national average is about, what, 160 bu/ac? vs. 93 bu/ac in ‘73?) but if we were to assume a fairly inflation-constant constant price for the commodity, and work in the yield increases vs. acreage changes, corn should still be about $6/bu. The population of the US has rather steadily increased since 1973 as well, (from about 211 million to over 300 million) so demand has increased.
http://www.agecon.ksu.edu/Risk/Tierney/Corn/S&D/corn_uss&d.htm
Fertilizer prices have been on a tear since Katrina and natural gas prices have been on wild, hedge-fund inspired fluctuations. It used to be that a farmer could lock in his inputs in the fall for next spring. Diesel fuel prices have more than tripled.
Now, many seed, fertilizer and chemical producers refuse to give you price quotes beyond 30 days. One of the offsets for the reduced chemical inputs is the increase in seed prices due to tech fees. It used to be that you could use bin-run seed, but if you’re using Monsanto genetics, you’d better not let them catch you doing that. And let’s not forget increased labor costs as well as increased equipment costs.
To me, the most reliable indication is this: “How many acres of corn farming does it take to support a family of four?”
That used to be about 400 to 600 acres. Now it is over 2,000 and climbing.
And what we see are people carping and whinging about $4/bu, and Mexicans claiming we’re trying to starve them, etc, etc, etc.
It’s insane. It’s as if people actually believe this nonsense out of the Fed that “there’s no inflation — except the inflation in food and fuel....”
And then we get the most recent round of carping and sobbing about how ethanol is driving up the price of wheat. Doesn’t matter that the Ukraine has capped their wheat exports and taken a huge amount of wheat off the world market, or that Australia is in the second year of a drought:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aYYFlbtwaYFA&refer=home
Never mind the reality of wheat as a world-wide commodity.
It is all “ethanol’s fault!”
Sigh.
One of the best ways I point out how absurd Pimental’s work is to people is to focus on only one issue in his energy balance computation: the energy consumed by the farmer himself.
Pimental includes the energy estimates in the food the farmer eats into the “costs” of ethanol.
The problem with this “analysis” is this: Unless you KILL THE FARMER, that energy will be consumed whether the farmer is growing corn, growing turfgrass or decides to leave the farming industry all together and run a hedge fund. As long as the human being who is the farmer is alive, that energy is being consumed. Therefore, that energy “input” into Pimental’s “ethanol energy balance” is utterly bogus.
The other thing he includes in the energy balance is the energy required to make the steel that goes into the farm equipment. This too is bogus — steel, being a fungible commodity, would have been created and used for something else. Or, another way to look at it — that steel would have been used to make farm equipment to raise vegetables just as much as it would have been used to make the equipment to raise corn.
Thanks for the story. I haven’t been watching that long, but I think I’ve heard the same sales pitches.
The cap-and-trade carbon trading game will be the biggest international scam of all times, IMO.
Being an EE as well (these threads seem to attract FR’s engineers), I’ve been involved in some of these “solar power will set us free” debates with the loons in California.
I’ve had to repeatedly demonstrate two things:
1. They always get the estimates for how much land (or other surface area) they need to cover with PV cells is less than half what is really needed. The first and most common mistake these yahoos make is that they forget that ever 24 hours, we have this thing called NIGHT. This is when PV cells quit producing power.
And then they forget this annual thing called “seasons.”
So we need to over-build the PV field to produce about 2.5X what the average daily draw is, so we can store a big chunk of it for nightfall.
2. Then I point out that we need to store huge amounts of power. They always talk about some new whizzy battery technology. This gets me rolling my eyes. There are no battery technologies that scale to what we’re talking about here. I point out that what we really need to think about are huge hydropower projects for storage. During the day, when we have excess power, we will pump water uphill, behind the dam or (better yet) simply not let water down during the day, using the PV over-capacity to power the grid during the day. Then at night, we use hydro to supply power to the grid.
This, of course, sets off the true believers into their “anti-hydrodam” rants and lectures.
These people invariably seem to be liberal arts majors who were partying hearty during school, while we EE’s were slaving away, learning tons of math and applied science. Now that we (as a society) are having to confront some of these problems, the liberal arts types think that because they went to the tawny schools with the big-name rep, their opinions trump engineering facts.
“Second law of thermodynamics? What’s that? Who made up this ‘law’?”
Sigh.
Thanks for your comments.
Amazing they are basically the same as my neighbor’s comments over 30 years ago.
He was correct then, and you are correct now.
I don’t see any advantage to the corn whiskey additive. In theis area we are forced to use gasoline that’s 10% corn whiskey. My gas mileage also dropped 10%. What’s the point?
Thank Goodness there are FReepers like you that know and UNDERERSTAND ALL THAT YOU KNOW about energy!!!
Then, have the skill and grapics to communicate those correct understandings to fellow FReepers and Lurkers!!!
By way of comparison, consider that US domestic oil production has fallen from an average of 260 million barrels a month in 1970 to less than 160 barrels a month in 2007. It's you damn farmers who have caused this.
Just "cut and paste" of US government charts.
That was 290 million barrels a month in 1970.
This pump & dump mailer says "THIS STOCK COULD SOAR 500% - OR MORE!" "The only public company 100% focused on fighting global warming."
They finally turned old retired Stan Atkinson of Channel 3 against them in their battle to steal Yolo County's power grid from PG&E. (Pacific Graft & Extortion) or (Pigs Goats & Elephants)
How many shares did ya buy? ;-)
ZILCH!!! (of course) It lost 25% today and fell all the way to $1.05!!! WHAT? Do you think I’m nuts??? (do NOT answer that!)
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